SBA Fraud / PPP Loan Fraud Defense
What happens if a company is prosecuted for PPP loan fraud? What exactly is PPP loan fraud, and what can you do to clear the charges?
The CARES Act was made law on March 27, 2020. This coronavirus stimulus package provided relief to small business owners and Americans who had lost their jobs. The goal was to help people be economically secure until the coronavirus pandemic ended. One of the biggest pieces of the CARES legislation was the Paycheck Protection Program, otherwise known as the PPP.
The PPP was given almost 350 billion dollars in federal funding. It was designed to give relief to small businesses and mid-size businesses that could not continue paying their employees due to the financial strain from the coronavirus impact.
Even though there were hundreds of billions of dollars in aid, the funding was all gone minutes after it was made available. Applications flooded in to the government asking for relief. Companies that ought to have been eligible were left with nothing because there were no funds left to give them.
Federal programs that provide financial relief will always be accused of fraud. But the scrutiny is even heavier regarding the PPP. Since the funds were depleted so quickly, companies that were able to receive PPP funding will be scrutinized by federal officials to be sure they haven't taken money that could have been used for a more deserving business.
Fraud Concerns Identified
Many people have criticized the setup of the PPP system, and various concerns about fraud have been raised. Right now, the federal government is taking input on how to offer better protection with future programs, as well as how to combat the issues that were seen with PPP.
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Part of the fraud concern is because of how disjointed the application process was. But there are other fraud concerns as well. Certain federal agencies are currently going through the businesses that received federal aid and working to identify those that received funds under false pretenses. It's very likely that these businesses will be prosecuted, since the PPP was so widely criticized for how quickly it was depleted.
If a company is accused of receiving fraudulent federal aid, it's important that they speak to a lawyer who is experienced in working with the federal government.
Types of PPP Fraud
Any federal program can be subject to fraud. Various application omissions and financial acts can be constituted as fraud. Where the PPP is concerned, fraud may be incurred in both inadvertent mistakes and intentional misrepresentations. Even if you didn't mean to make the error, your business still received fraudulent federal funding that could have gone to someone else.
Loan Stacking
One of the fraud iterations is "stacking" your loans. If applicants received loans from several different lenders, they are guilty of fraud. People are only supposed to have loans from one lender. The additional money should have been given back to the government rather than distributed.
According to the federal government, investigators intend to focus on this kind of fraud. It's one of the easiest types of fraud to trace, since government officials can see who received funds from different lenders.
Submitting False Information
Another form of fraud is submitting false information on the loan application. To be eligible for the relief, you needed to meet certain criteria. If your company didn't actually meet all the criteria, but you misrepresented your application so it looked like it did, you might also be subject to fraud charges.
Companies may have misrepresented:
- How many employees they had
- Whether their employees were independent contractors
- Whether the business met the small business eligibility requirements
- What the company's payroll costs were
All of these things may have gotten a business approved when it shouldn't have been, or gotten a business a larger loan than it should have received.
False Certifications
Applicants also needed to certify certain facts before submitting. If you falsely certified these facts, you may be charged with fraud. You needed to certify that:
- The loan was necessary for the operation of your business
- The funds would be used for your payroll or mortgage
- You would only receive one loan
- You submitted accurate information in your application